BLBG: Gold Climbs to Near Eight-Week High as Dollar Drop Spurs Demand
By Nicholas Larkin
Dec. 15 (Bloomberg) -- Gold rose to near an eight-week high in London as the dollar fell for a fourth day, boosting the metal’s appeal as an alternative investment. Platinum gained.
The dollar fell to an eight-week low against the euro on speculation the Federal Reserve will lower interest rates and the U.S. will bail out the auto industry with funds meant to shore up banks. The Fed will cut its target rate for overnight loans between banks tomorrow to the lowest level since 1958, according to the median estimate of 84 economists in a Bloomberg survey.
“Precious metals are benefiting from the much weaker dollar as we head into year-end,” Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg, wrote in a research report today. A cut in U.S. interest rates by 75 basis points “would be bearish for the dollar,” he said.
Gold for immediate delivery rose as much as $11.20, or 1.4 percent, to $833.55 an ounce and traded at $827.97 by 10:52 a.m. in London. February futures gained $7.70, or 0.9 percent, to $828.20 in electronic trading on the Comex division of the New York Mercantile Exchange.
The metal rose to $827.50 in the morning “fixing” in London used by some mining companies to sell production, from $826.50 at the afternoon fixing on Dec. 12. Gold, which reached a record $1,032.70 an ounce in March, is little changed this year.
The futures market priced in a 72 percent probability that the Fed would cut interest rates by 75 basis points. The remaining 28 percent foresee a 50-point cut. Bullion typically moves in the opposite direction to the U.S. currency.
A U.S. report today will probably show industrial production fell in November for the third time in four months, according to a Bloomberg survey of economists.
Gold Survey
Gold climbed 8.7 percent last week, the biggest gain since September. Twenty-one of 27 traders, investors and analysts surveyed from Mumbai to Chicago on Dec. 11-12 said the metal may rise for a second week on speculation the Fed will cut its bank- lending rate. Three said to sell, and three were neutral.
Gold “could be in for quite a choppy week with the markets torn between reaction to U.S. interest rates and year-end book squaring,” James Moore, an analyst at TheBullionDesk.com, wrote in a note. “Overall we would look for gold to consolidate further above $800” an ounce, he said.
Hedge-fund managers and other large speculators decreased their net-long position in New York gold futures in the week ended Dec. 9, according to U.S. Commodity Futures Trading Commission data.
Speculative Positions
Speculative long positions, or bets prices will rise, outnumbered short positions by 83,155 contracts on Comex, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 1,214 contracts, or 1 percent, from a week earlier.
Switzerland’s Zuercher Kantonalbank said gold assets in its exchange-traded funds rose to 3.082 million ounces last week, from 3.034 million ounces the previous week. Platinum holdings increased to 114,820 ounces, from 108,448 ounces. Silver and palladium investments also gained.
Among other metals for immediate delivery in London, silver rose 1.2 percent to $10.425 an ounce. Platinum gained $14.50, or 1.8 percent, to $835 an ounce, and palladium was 0.4 percent higher at $174.75.
Platinum gained “amidst renewed hope of a rescue deal for the beleaguered U.S. automakers,” Moore said.
President George W. Bush said deliberations by his government on tapping the bank bailout fund to keep General Motors Corp. and Chrysler LLC out of bankruptcy “won’t be a long process.” The Senate on Dec. 11 rejected a $14 billion aid package for the companies.
Automakers account for about half of global platinum and palladium consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
